Digital champions do not win alone

Transformation of a company’s digital operations isn’t easy and requires companies to build new capabilities. A clear takeaway from our Global Digital Operations Study 2018 is that digital champions are not winning alone – rather, they excel because of their ability to orchestrate complex ecosystems to their benefit.

Customer solution ecosystem. Digital champions continuously strengthen and enhance their digital product and service offerings as well as their access to customers, directly or through third parties. They excel in creating customer insights, and they match customer requirements to compelling and tailored solutions, enhancing traditional products with services, software, data analytics, and additional value from extended partner networks. To achieve this, digital champions utilize open platforms and tear down internal and external boundaries.

The operations ecosystem. Customer solutions must be supported by a fit-for-purpose operations ecosystem. Digital champions align these aspects of their businesses by building on their own and their partners’ core strengths to define the customer solutions and, in turn, letting the customer’s requirements set the targets for the operations ecosystem which encompasses the physical activities and flows. While these physical activities may be managed by external entities such as suppliers, contract manufacturers, distributors, logistics providers, and inventory managers, digital champions ensure they are aligned around satisfying their needs.

With the development of a mature operations ecosystem, companies can improve transparency, leverage real time data sharing, benefit from extended collaboration, increase responsiveness and develop flexible solutions building on seamless connectivity.

The technology ecosystem. The technology ecosystem is a supporting ecosystem that leverages IT architecture and digital and emerging technologies to propel and prop up the operations, customer and people ecosystems. It implements innovative technologies throughout the business which are aimed at providing digital solutions for the needs/activities as determined by the other ecosystems. Companies are able to propel their value creation through choosing more flexible and advanced methods of production and partnerships with other technology partners which speed up the development and implementation of use cases.

The people ecosystem. The people ecosystem enables and supports the efforts of the other three ecosystems. As a result, the contours of the people ecosystem can best be viewed through the lens of how digitization affects a company’s strategic direction (its solutions) and its performance (its operations). By assessing these factors, a company can determine the types of workers and skills that will be needed to support its efforts to improve value chain results and operational outcomes.

Importantly, the people ecosystem must encompass external as well as internal staff. It embodies the internal workforce, freelancers, contract workers from digital agencies or talent pools, on-demand labor platforms, and shared employees with partners for mutual projects. Digital champions shift from an ‘analog’ culture of one-dimensional, hierarchical company decision making to a ‘digital’ culture which allows for more free flows of information and more flat structures amongst members.

Orchestrating this environment

Ecosystem strategy definition. Companies need to create an overall ecosystem plan that stands true to the company’s mission through the lens of Industry 4.0. This involves developing ecosystem governance processes, centralizing their core capabilities, deciding product positioning and what services to offer customers and how to individualize these solutions offerings.

Vertical and horizontal integration. Company leaders need to design an overall ecosystem framework that includes the integration of each ecosystem’s goals, technologies, effort, logistics, and skills. Beginning with the customer solutions ecosystem, which serves as the umbrella of the environment, the demands of the customer are determined and capabilities – whether in-house, bought, built or through partnerships – are aligned. Through this determination the operations ecosystem can be developed to suit these needs; it is then enabled by the technology and people ecosystems. This integrated network must have the ability to be iteratively adapted and flexible enough to reach the organization’s goals.

Reinvestment. With the establishment of this integrated environment, the company needs to take decisive measures to capture the new value added. This is monitored through new practices, processes and controls which help to drive and capture the efficiencies and improvements made by each ecosystem. In turn, as the ecosystems evolve, the company should continue to drive these changes by smartly reinvesting into the growth of each ecosystem.

The landscape for new adopters

The scene is set for Industry 4.0, with early adopters reaping the most benefits from the transformation; however, the landscape is ever-developing and companies who have not yet achieved digital maturity still have space to reap benefits from this transformation. The survey results suggest that through investments in the technology over the next five years, companies will see improvements in efficiency and cost reduction as well as revenue gains between 9-20% depending on their digital maturity.

Industry 4.0 as actualized through these ecosystems will cause large shifts to manufacturing companies and the wider industry; labor needs, customer interactions, how we do work, working times, design, test and procurement will all be rapidly transformed. For Industry 4.0 to be achieved, the customer solutions, operations, technology and people ecosystems must function together.